Convergence of adaptive learning and expectational stability: The case of multiple rational-expectations equilibria
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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in: Macroeconomic Dynamics, Jahrgang 4, Nr. 3, 01.09.2000, S. 263-288.
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Convergence of adaptive learning and expectational stability
T2 - The case of multiple rational-expectations equilibria
AU - Heinemann, Maik
PY - 2000/9/1
Y1 - 2000/9/1
N2 - This paper analyzes the relationship between the expectational stability of rational expectations solutions and the possible convergence of adaptive learning processes. Both concepts are used as selection criteria in the case of multiple rational expectations solutions. Results obtained using recursive least squares lead to the conjecture that there exists a general one-to-one correspondence between these two selection criteria. On thebasis of a simple linear model and a stochastic gradient algorithm as an alternative learning procedure, it is demonstrated that such a conjecture would be incorrect: There are cases in which stochastic gradient learning converges to rational expectations solutions that are not expectationally stable.
AB - This paper analyzes the relationship between the expectational stability of rational expectations solutions and the possible convergence of adaptive learning processes. Both concepts are used as selection criteria in the case of multiple rational expectations solutions. Results obtained using recursive least squares lead to the conjecture that there exists a general one-to-one correspondence between these two selection criteria. On thebasis of a simple linear model and a stochastic gradient algorithm as an alternative learning procedure, it is demonstrated that such a conjecture would be incorrect: There are cases in which stochastic gradient learning converges to rational expectations solutions that are not expectationally stable.
KW - Economics
KW - Expectational stability
KW - Learning
KW - Multiple equilibria
UR - http://www.scopus.com/inward/record.url?scp=0034398636&partnerID=8YFLogxK
U2 - 10.1017/S1365100500016011
DO - 10.1017/S1365100500016011
M3 - Journal articles
VL - 4
SP - 263
EP - 288
JO - Macroeconomic Dynamics
JF - Macroeconomic Dynamics
SN - 1365-1005
IS - 3
ER -